Banks boost Europe stocks after mixed U.S. data

Grifols surges 12% after doubling first-quarter profit

LONDON (MarketWatch)—European stock markets rallied in a volatile session Tuesday after a mixed bag of U.S. housing and confidence data, as broad-based gains for banks boosted equity indexes.

The Stoxx Europe 600 index (SXXP) closed 1% higher at 254.37, partly recovering from a 2.3% drop on Monday. The index plunged to its lowest level since mid-January a day earlier on the back of weak manufacturing data in the region and political uncertainty in France and Netherlands.

“We need to be cautious. It’s still a difficult market,” said Jacques Porta, fund manager at Paris-based Ofi Patrimoine. “The debt crisis is not over here in Europe, and the U.S. economy seems to be OK, but not very strong.”

“We will see some bearish markets where stocks go lower,” he added.

Finnish Kone Oyj (KNEBV) surged 8.2% after the engineering group upgraded its outlook for 2012 on the back of strong orders and reported 17.8% sales growth in first quarter. Finland’s OMX Helsinki 25 index (OMXH25) rallied 3.2% to 2,047.03, outperforming all other European indexes.

Elsewhere, TeliaSonera (TLSN) jumped 6.6%. The Swedish telecom operator reached a deal with other shareholders in Russian MegaFon, in which MegaFon will pay a $5.15 billion dividend to shareholders and seek an initial public offering. TeliaSonera: MegaFon to pay out $5.15B, seek IPO

KBC Group NV (KBC) surged 7.4% after ING upgraded it to buy from hold.

A fresh batch of U.S. data sent mixed signals about the state of the recovery in the world’s largest economy, but markets went from trimming gains to rising higher in afternoon trade as Wall Street chalked up gains for stocks.

Painting a different picture, new homes in the U.S. sold at an annualized rate of 328,000 in March, slightly above market forecasts. And a gauge of consumer confidence declined for a second month in April and disappointed analyst expectations. April consumer-confidence gauge declines to 69.2

Investors were waiting for Apple Inc.
AAPL, +1.72%
earnings due after the closing bell on Wall Street. U.S. corporate earnings have remained upbeat, but European stock markets have ignored the trend, said Richard Perry, chief strategist at Central Markets.

“If Apple comes out strong and markets still don’t push higher it’s a clear signal to investors that this could be the start of a summer where markets will continue to struggle,” Perry said.

He added that Tuesday’s gains on European bourses were merely a rebound from sharp drops the previous day and a short-term reaction to the slightly positive surprise for U.S. home sales.

“At the moment, the market is so driven by any kind of news flow it can get its hands on and that was a little bit of good news. But I don’t imagine it’s sustainable,” Perry said.

Among notable gainers, Grifols SA (GRF) performed the best among major European stocks as shares of the Spanish biotech firm surged 12% following its report that profit for the first quarter doubled.

The IBEX 35 index (IBEX) came close to making up for Monday’s losses, adding 2.2% to 6,999.90. Spain’s government sold 1.93 billion euros ($2.53 billion) in short-term bills, near the top end of its target range. Spain sells 3- and 6-month bills

Another big gainer, Michelin (ML) added 6.1% in Paris after it reported a 5.1% increase in first-quarter revenue and reaffirmed its 2012 outlook. HSBC lifted its rating on Michelin to overweight from neutral.

The French CAC 40 index (PX1) closed 2.3% higher at 3,169.32, further buoyed by STMicroelectronics NV (STM), up 2%. The chip maker said second-quarter revenue is expected to grow between 4.5% and 10.5%, following a quarter of weak sales.

U.K. banks also rose, lifting the FTSE 100 index (UKX) to a 0.8% gain at 5,709.49. Citigroup reiterated its overweight recommendation on the country’s banks, and named two of its top picks: HSBC Holdings PLC (HSBA)
HBC, -0.38%
up 1.4%, and Barclays PLC (BARC), up 3.2%.

Bucking the positive trend, Imperial Tobacco Group PLC (IMT)
ITYBY
gave up 1.1%, and British American Tobacco PLC (BATS)
BTI, +0.68%
lost 1.8% after Bank of America Merrill Lynch downgraded both companies to neutral from buy.

In Germany, the DAX 30 index (DAX) was up 1% to 6,590.41. Deutsche Lufthansa AG (LHA) rose 2.3% after Credit Suisse upgraded the airline to an outperform rating from neutral previously.

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